Air Asia Berhad originally founded by DRB-Hicom in 1993 before it was bought over in December 2001 by a company called Tune Air Sdn Bhd. Tune Air’s owner, Dato’ Sri Anthony Francis Fernandes or usually called Tony Fernandes had thought of an idea to introduce a product that will take the world by storm. The event of Tony Fernandes taking over Air Asia Berhad seemed impossible to everyone. Almost everyone thought that it was a big mistake and that the company will fell deeper in debts, but people were terribly wrong about it. Just a year after Tune Air Sdn Bhd had taken over, it was making a huge progress. Under Tony Fernandes, Air Asia break even and had settle all its losses and paid it debts. That brings to what Air Asia is now. For several years, Malaysia Airlines had monopoly the airline market, becoming the first national airline. But recently Air Asia has taken the place of the former national airline monopoly, Malaysian Airlines (MAS).
The first true low cost airline was an Irish airline called Ryanair, which was founded in 1985. Looking at how Ryanair had grew over the years, had Tony Fernandes thinking and with the moral support he got from Malaysian former Prime Minister Tun Dr. Mahathir Muhammad, Air Asia was born. The main idea of Air Asia is to make flying possible to everyone. Since 2001, Air Asia has begin to rise to the top of the ladder flying to more than 20 routes. This including 15 destinations in Malaysia alone and more than 50 other destinations around the globe. Adopting Ryanair concept to promote airline lower fare tickets, Air Asia had become the first low cost fare airline in Asia with a promotional rate as low as
RM 1. This had everyone talking and beginning to fly with Air Asia.
Air Asia first hub was at Kuala Lumpur International Airport (KLIA) and started it operations to fly domestically. In 2003, Air Asia opened another airline hub at Senai, Johor and launched the company’s first international flights, to Bangkok, Thailand. The flights to Bangkok was a success, so Air Asia started to open other international routes including Singapore, Vietnam, Myanmar, Indonesia, Macau, Hong Kong and other holiday getaways. In the early 2006, a new low cost terminal called Low Cost Carrier Terminal (LCCT) was opened near Kuala Lumpur International Airport area.
Ever since, all Air Asia flights are based here at LCCT. Although LCCT is reportedly smaller in size than KLIA, the terminal can handle up 10 million passengers a year.
There are two main factors to a company’s success story, which are external and internal factors. These two factors can be defined by running the SWOT analysis on the company. The meaning of internal factor here means that one should look into the strength and weakness of the company and factors such as opportunities and threats are the external factors. The airline industry is one of the largest economy opportunity because it has a massive impact on fellow travellers worldwide. The number of travellers increase every month and every year. This shows great opportunity for Air Asia to enter the airline market.
Air Asia’s brand name
As the second Malaysian National airline, Air Asia has seemed to prove that it grow rapidly over the years. Under good management of Tony Fernandes, Air Asia has been adding new destination routes every year. Air Asia’s brand name is very well established and known in the Asia Pacific. The company uses media advertising advantages very well by implementing the “media friendly” concept. The company advertising strategy is to share every success story with the public. This strategy helps the company gain the media and public attention as well as gaining more passengers every year. With a very friendly image that the company has set up in the public eye, the company’s brand name has become quickly known world wide. The ways Air Asia distribute the company’s low cost fare, merchandises and promotions are very straight forward and yet very interesting. A major approach by Air Asia was made with major commercial hotels, car rentals, travel services, banks including the Citibank.
Citibank and Air Asia has created another unique image by introducing Air Asia Citibank card. Not only Citibank, but Air Asia has also taken the attention of Galileo Global Distribution System (GDS). GDS helps travelers around the world to check flight schedules and other flight information with Air Asia. Air Asia also keeps creating fresh image in advertising. Not too mention the link that Air Asia have created recently with Manchester United and AT & T William’s Formula One team have definitely push the brand, Air Asia flying above the ground.
Air Asia’s strong management
Air Asia has a very strong management. For instance, Shin Corporation, Thailand’s largest telecommunications company holds around 50% of Thai Air Asia share which gives Air Asia the opportunity to build a bigger market size with Thailand. With a very good connection with Thailand’s largest commercial company, this will bring Air Asia’s image rising to the surface of Asia Pacific. With this affiliation, people from Thailand or travellers going to Thailand, will most probably fly with Air Asia.
Air Asia is the low cost airline leader
Air Asia has been the leader of low fare airline in Asia for the past few years since it was established. No other airlines have successfully gain the competitive advantage as Air Asia. This is a positive outcome for Air Asia. Therefore, as the number of travellers increases in the Asia Pacific area, Air Asia will gain more customers especially during the holidays. But in order to maintain the number of customers, Air Asia has to improve in other fields such as customers convenience and flight schedule.
As many other commercial enterprise, Air Asia also faces many weakness. These are some of the weakness of Air Asia.
Air Asia service needs improvement
Recently, what is said to be a success, has a lot of improvement to be taken seriously. Air Asia have been receiving many complaints on the delay of the flights, the unstable flight schedule, the ticketing services and even the flight attendants services. Air Asia customers also post complaints about the company’s poor performance due to the flight delays that could alter the entire day flight schedule. Many Air Asia customers converted on flying with other major airlines, including Air Asia’s rival, Malaysian Airlines. Some people said it was either pay more for better service or choose to pay less and get bad services. These kind of behaviors could tear the fresh image that is being created by Air Asia. Many have set complaints that for the past 2 years since the major losses made by Air Asia in 2008. Near the end of 2008, Air Asia faced their first loss with a net loss of RM 465.5 million. During the loss made by Air Asia, the company blamed the overall poor service performance. But, Air Asia had quoted that the loss was “short term pains for long term gains”.
Air Asia also need to improve their ground performance such as the ticketing sales, the check in counter and the ground security measures. In year 2009, Air Asia has been improving the company’s terminal in LCCT by building a bigger terminal area for the travellers of Air Asia. But, what is important is the environment inside. To make travellers feel comfortable, Air Asia should focus more on their services to maintain their image.
Asean Open Skies
The “ASEAN Open Skies” in December 2008 has allow unlimited flights among the ASEAN’s regional airlines. This may seemed as a threat for Air Asia at first, but this could also be an opportunity for the company as it is still the lowest cost air carrier among the others. The company brand name is well known in the ASEAN especially that it has created strong image among the workforces in Asia Pacific and also the company’s strengths in management can bring this matter as another opportunity for them. This means that Air Asia does not have to limit the flights to a certain level. Air Asia is allowed to operate many flights to any destinations in the Asia Pacific. This could increase the amount of profit the company might gain as there will be more people prefer lower cost airlines.
Rates such as the airport departure rate, airport security charges and landing charges are beyond the company’s control. This could be a threat to all airlines especially for one like Air Asia because it is a lower cost air carrier.
No Disable Policy
This had recently happened, that the public especially the disabled people feel segregated and discriminated as Air Asia had the policy to refuse carriage for the people who are not able to walk. This is a threat to society because Air Asia main idea was “now everyone can fly” and if this kind of matter keeps on rising, this will make the public wonder where is the social value of Air Asia and might change the public perspective of the company.
Customer’s perception here means that there might or will be user’s bad perception to
low cost airline might affect a poor safety measure to keep the costs low. This image here could be a major threat to any low cost airline because it could affect the ticket sales of the airline. In order to reduce this kind of threat, Air Asia could demonstrate a better service and in flight performance regarding the customer’s safety during the customer’s travel with Air Asia.
Air Asia Current Stage
Nowadays, Air Asia has improved their strategy in order to compete with other airline companies. Since e-commerce and e-business are increasing most commercial companies success rate. Air Asia is implementing e-commerce strategy in the company’s business. For example, Air Asia is increasing the use of IT management in purchasing ticket on-line, select seating and ordering special in flight menu’s straight from the Internet. Other than that, sales of Air Asia merchandise also improving their images with the public and the company’s other affiliation, because Air Asia also put the company’s partners logo on their merchandise. This could boost up their marketing level.
Air Asia also introduces the seat promotions, whereby customer’s can purchase seats and tickets at a cheaper prices if the customer’s purchase it much later than their travelling time. Every reserved seat is considered as an opportunity to maximize profits. For more comfortable seats and more convenient service, Air Asia has introduced Air Asia X. Furthermore, there was a recent event about the disable people protested against Air Asia no disable policy. Strongly urge that Air Asia should take this matter more seriously to avoid other public threats from rising.
Throughout this research and from the result of the SWOT analysis that has been made, come to a conclusion that there are strong competitions between airline carriers around the world. Therefore, for a low cost airline to enter the airline market, it has to face even stronger competitions to rise up to the top among the other airline. In order to achieve and maintain the company’s goal, the company must learn the barriers to entry of the economic scope so that the company can obtain competitive advantage in order to survive the airline business. Also resulting from the weaknesses and the threats that Air Asia is facing, Air Asia should improve the service performance in order to maintain the company’s lead in the low cost airline market.
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